Five principles can reduce cost of health care to business

Two new reports show steady growth and continued optimism for the manufacturing sector. The quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook showed a March 2006 composite index of 74 equals that of the previous December 2005 survey, an indication that the industrial component of the U.

By John Engler, President, National Association of ManufacturersMay 1, 2006

Two new reports show steady growth and continued optimism for the manufacturing sector.

The quarterly Manufacturers Alliance/MAPI Survey on the Business Outlook showed a March 2006 composite index of 74 equals that of the previous December 2005 survey, an indication that the industrial component of the U.S. economy, with the possible exception of the auto industry, remains on firm ground.

A composite business index above 50 indicates that overall manufacturing activity is expected to increase over the next three months to six months. It should be noted, however, that the index measures the direction of change rather than the absolute strength of activity in manufacturing.

Eight of the 10 factors measured by the quarterly survey were higher than the previous report.

The profit margin index showed the greatest improvement, jumping from 74% in December to 82% in March, setting a new record by surpassing the index’s previous high of 79% reached in June 2004.

Two other individual indexes equaled their all-time highs. The export orders index, which measures how first quarter 2006 orders are expected to compare with those of first quarter 2005, increased from 74% in December to 78% in March. This ties the 78% reached in March 1995 and in March 2005 and indicates that for a wide majority of firms profit margins are higher than one year ago. The investment index reflects executives’ expectations for capital investment in 2006. The index improved to 81% in this survey from 79% in December 2005, tying the record high in December 2003, indicating that most see investment rising in 2006.

The orders index, which compares new orders for the first quarter of 2006 with the same quarter one year ago, increased from 84% in December to 89% in March.

The latest Manufacturing ISM Report On Business, issued by the Institute for Supply Management Manufacturing Business Survey Committee, says economic activity in the manufacturing sector grew in March for the 34th consecutive month, while the overall economy grew for the 53rd consecutive month.

The PMI indicates that the manufacturing economy grew in March for the 34th consecutive month as it registered 55.2%, a decrease of 1.5 percentage points when compared to February’s seasonally adjusted reading of 56.7%.

ISM’s New Orders Index grew in March with a reading of 58.4%. The index is 3.5 percentage points lower than the seasonally adjusted 61.9% registered in February. March is the 35th consecutive month the index has exceeded 50%.

ISM’s Employment Index expanded for the 10th consecutive month in March. The index registered 52.5% in March compared to the seasonally adjusted 55% registered in February, a decrease of 2.5 percentage points.

The delivery performance of suppliers to manufacturing organizations was slower for the 33rd consecutive month in March. ISM’s Supplier Deliveries Index for March registered 53.1%, an increase of 0.9 percentage points when compared to February’s seasonally adjusted reading of 52.2%.

To succeed in an intensely competitive global marketplace populated by cost-cutters and copycats, U.S. manufacturers have become increasingly focused on quality. Reliability, longevity and adaptability %%MDASSML%% these are characteristics manufacturers know will provide their products an edge over cheaper competitors.

Not coincidently, these characteristics are also the hallmarks of a quality employee, the kind of worker companies want to recruit and retain. To do so, manufacturers offer %%MDASSML%% and employees expect %%MDASSML%% benefits such as good pay, generous retirement, and broad health-coverage.

But health care coverage keeps getting more expensive. Many members of the National Association of Manufacturers report double-digit premium increases every year, and more than a few feel pressure to drop coverage.

The NAM’s Board of Directors considered this competitive environment when it met in March and passed a set of principles to guide members in their discussions about health care.

These policies provide a good start for discussions at the plant and corporate level, and with the government and health-care officials you work with.

Greater transparency in health care

Employers and consumers alike need ready access to information, so they can compare health care plans and providers on the basis of both cost and quality.

It’s a simple, market-oriented approach: Purchasers of health-care services reward hospitals and doctors who do a good job. But to do so, manufacturers need good information %%MDASSML%% transparency.

Better manage chronic diseases

An estimated 70 cents of every health care dollar goes to treat chronic conditions, such as diabetes and asthma %%MDASSML%% conditions for which the risk factors, such as obesity, are well known.

Better manage high-dollar health care claims

Our health care system should place more attention on preventing diseases instead of treating them once the illnesses develop. In the past, treatment has often been the first course of action, and the result was extremely expensive claims. Whether from a progressive condition or an accidental injury, these high-dollar health care claims make it more difficult for employers to manage their health care plans.

Encourage consumerism

Our health-care system has not called on consumers enough for their involvement, and the result is an overuse of health care resources.

Many consumer-oriented benefit designs are available to employers: The Health Savings Account, or HSAs; Health Reimbursement Arrangements, HRAs; and Flexible Spending Accounts, FSAs. These consumer-oriented designs offer a great and growing potential, and not just for the young and healthy.

Encourage early implementation of health information technology

Information technology has made businesses more efficient, more responsive and more fanatical about quality.

Manufacturers engage in a continuous cycle of improving quality, adjusting costs, and assessing their suppliers. They adapt, adopt and work hard to maintain their competitive edge %%MDASSML%% an edge kept sharp by providing employees with high-quality health care.

As the challenge of providing that coverage at an affordable cost grows, manufacturers must take a greater role in influencing the public debate on health care.